We talked to a first-time homebuyer in Houston about her and her husband’s decision to settle down (without giving up their dream to visit Antarctica), putting less than 20% down, and finding their dream “Cowboy House” after years of looking.
Q: Tell us a little about yourself.
A: I'm a 27-year-old public school teacher and an avid home cook, fiction novel reader, and square foot gardener. My husband is 29 and does digital marketing for a nonprofit. We love to travel to other countries and then come home and balance out the adventure with a good dose of homebody – binge watching The Bachelor(ette) or Big Brother with a pepperoni/pineapple pizza.
Q: Did you and your husband always know you wanted to own a home?
A: There was a time when we thought we would never own because we were worried about putting all our eggs in one basket and being stuck. We’re pretty adventurous and we tend to move around. Before we bought the house, we even talked about living abroad for a while. There’s something different about our generation. It’s not that we don’t want commitment; it’s just about having freedom.
Q: How did you ultimately come to the decision to buy?
A: The finances finally made sense. We realized we could afford a monthly mortgage and it would be the same as paying rent on an apartment. It also came from the desire to have kids and wanting to have that stability before that.
When we got married, we set a goal to travel to all seven continents before having kids. And those trips can be really expensive (how do we get to Antarctica?). In the end, we decided not to give up on goals like that just because we’re choosing to put down roots in Texas. We made a bucket in our budget for our travel goals and vowed we wouldn’t “steal” from it, even though we were also saving to do home renovations. It comes down to following through. Our house is important but there are other things we want to do with our lives too.
Q: How did you decide where you wanted to live?
A: We'd been saving for a down payment and looking at homes for a long five or six years, but our search stretched far and wide. We went to college in Lubbock, Texas (Wreck 'Em!) and moved to Denver, Colorado when we graduated around 2012. That was like total sticker shock. West Texas offers huge yards and handsome, ranch-style homes for a modest price. Denver has a rapidly moving inventory of the most charming, nugget-sized, $400K houses. As two young professionals trying to get our footing in a hot job market, we felt too broke (and not cool enough) to own a home in Denver. Seriously though, we were like, "it's freezing, and we will never be able to afford a house in Colorado," so we moved back to Texas. Houston has been home since 2015.
Q: How did you figure out how much house you could afford?
A: We scoured the internet for mortgage calculators and always estimated prices to be way over what we actually expected (if it said closing costs would be $5K, we'd estimate $10K). We also organized our finances after getting married. We use an online budgeting tool which helped us truly see our monthly take home and what expenses we could afford. Having all of our financial accounts organized was also hugely helpful throughout the loan application process.
About a year ago, on a friend’s recommendation, we went to see a local mortgage broker. We wanted him to tell us how much we could get approved for, what interest rates would really be like for us, and if we were looking in the right price range for a home (about $250K). We had been spot on estimating the mortgage costs and price range, but were shocked at how expensive closing actually was! ("You have to pay for someone to broker your loan? What does broker even mean?!") We left thinking we needed to save for about one more year.
In the end, we decided the sound option was to spend a comfortable amount on the down payment, and then to keep the total monthly mortgage payment (including the mortgage insurance, taxes, and interest) to less than 30% of our monthly take home. This is the final equation that worked for us: on a $275K house, we could put about 5% down, cover closing costs, and have some money left to do small fix-ups around the house before moving in.
Q: How did you feel about putting less than 20% down?
A: We both come from very financially conservative households. My husband's parents have always bought their homes outright with cash (yes, you're reading that right) and my mom has always been insistent that a down payment should be 25% of the home's price. We came to the realization that it's 2018, and we wouldn’t be able to play by those Leave It to Beaver rules. If we waited to get to 20% down, we’d still be saving for ten years. We knew putting less down would mean we’d have to pay mortgage insurance, but it was either that or continue renting for another decade.
Q: How did you go about your home search?
A: We had rented apartments in a few different parts of Houston, our favorite being right on the edge of Hermann Park. Eventually, we decided that we were tired of paying for someone else to own land. So with about two months left on our lease, we started to use a Texas real estate site more seriously. We set up a search area and filters and signed up for daily email alerts for what’s for sale. We also drove around the neighborhoods we were most interested in and started attending open houses by ourselves. When it came to picking a house, we were really shopping for the location. Houston is huge, and location dictates the kind of schools your kids go to, the amount of flooding that happens, and the traffic you have to deal with.
Q: Tell us about the home you ended up buying. Was there any competition to win the bid?
A: At first we found the perfect house really quickly. It was about $20K less than what we wanted to spend, zoned to a highly rated elementary school (one of the best public schools in a giant, not-so-awesome district), and didn't need any cosmetic work before moving in. We called and had been beaten to it – it was already option pending.
But then we looked across the street. There was a "coming soon" sign in the yard, along with a John Wayne silhouette leaning up against the pine tree, complete with a red bandana. We called the realtor and let them know we were interested. The woman who owned the house was in her nineties – she had bought it right it when it was built in 1955 and had been the only owner. The house was at the top of our price range, 3 br/1ba, and available to see TOMORROW. They told us there was a cash offer on the table, but the sellers wanted to continue showing it for one weekend to see if they could get asking price. We got pre-approved on Better that night (sooo fast!), went to see it, and made an offer. By the end of that weekend, we were under contract on The Cowboy House!
Q: If you could go back in time, is there any advice you would give to yourself?
A: I honestly wish we had heard about Better.com sooner. It's the advice I've been giving everybody I know that's interested in buying a home. It saved us a bunch of money at closing and made the antiquated process of applying for a mortgage feel less stressful and more intuitive.
Q: Why did you choose Better as your lender?
A: We were pretty intimidated by the process at the beginning. I think that’s how a lot of people in our age bracket feel. We chose Better over the broker we spoke to previously because it made the mortgage origination cheaper, it used an interface we were comfortable with, it saved us time by uploading all the documents (we would've been driving back and forth to an office in Sugar Land during Houston rush hour), and it was way faster than the traditional route.
I was surprised that a computer-based service could feel so personal and trustworthy. The website and branding are really well done, but the customer service and representatives we worked with were all so communicative, helpful, and real! You would think that it would be a lot of rigmarole to call customer service to answer a question, but it was easy. People emailed back the same day. If I had questions about a specific task, I could just send a message for that task. It was really seamless. Right now we’re purchasing cabinets online, and keeping track of those emails has been way more challenging!
This interview has been edited lightly for clarity.
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